how to become wholesaler

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how to become wholesaler

How to Become a Wholesale Vendor

There are multiple ways to become a wholesale vendor, but everyone who does so follows a similar path. Here are the essentials on how to become a wholesale vendor: 

  • Research the products you want to sell. Since there are so many products to choose from, it’s important to settle on what you’re selling. Many eCommerce experts (see what is e commerce) recommend starting in one product niche and expanding as your business grows. Otherwise, you’re competing with dozens of successful brands, each of which is reaching existing customers. 
  • Start developing relationships. It’s challenging breaking into the already vast market of wholesale distributors, vendors, retail outlets, and customers. This is why it’s smart to start early. Every retailer is interested in profit, so if you can demonstrate why your products are conducive to this end, they’ll be happy to work with you.
  • Figure out your pricing model. Wholesaling is appealing because you have more flexibility with profit margins. You can sell goods in smaller quantities to consumers, manufacture your own products, or sell in larger quantities to retailers. That said, you want to sell at the sweet spot for your product. Research what similar vendors are selling their products at, and price your goods accordingly.
  • Look for your target audience. Whether you’re selling to retailers or consumers, there’s a market you can succeed in. Knowing where your competitors are failing can give you an advantage, especially as a new wholesaler. You can uncover this information by reading product reviews, participating in forums, and creating a buyer persona. 
  • Finish the required paperwork. It’s not the fun part, but business documents are necessary to be a wholesaler. Laws and regulations tend to differ based on geographic location, so make sure to do your own research before starting. 
  • Set a minimum order quantity (MOQ). When you start gaining traction with retailers, many will want to know what your MOQ is. The idea behind this principle is to keep yourself profitable while retaining great relationships with clients. A great MOQ will be high enough to generate momentum for you, and low enough to prompt frequent ordering from retailers. 
  • Offer competitive deals. Retailers are accustomed to numerous vendors vying for their attention. If you want to stand out, it’s going to take more than a quality product. Retailers have budgets too, so you don’t want to make unreasonable requests. Incentivize their business with you by offering bulk order discounts and flash sales.

how to start a wholesale business at home

6 steps to starting a wholesale business

1. Decide what you want to sell

There are many directions you can take your business in when you’re researching how to start a wholesale business. You’ll probably want to be a wholesaler that focuses on one group of products or another, instead of trying to manage wholesaling different types of goods. There are plenty of options out there and you might already have an idea of what you want to sell.

Some options include being a wholesaler of building materials, deciding to sell home goods and food items or maybe you’re interested in wholesaling electronics like televisions. Whatever it is you want to sell, you should do some research to nail your product offerings down before moving on to the other steps.

2. Choose a business name and entity

The second step on our how to start a wholesale business list is to come up with a business name and to choose a business entity. You want to make sure that your business will have a unique name that isn’t already taken by another business out there. To do this, you can usually check with your state’s Secretary of State business search page. Many allow you to search business names online to see whether the name you want is available.

You should also choose a business entity. Different entities or business structures have different benefits they offer. Some wholesalers operate as an LLC, which shields them from personal liability while providing the option to be taxed either as a sole proprietor or corporation. Some might find it beneficial to register as an S-corp for tax purposes. Whatever you choose, first consider whether you want your personal assets protected from any legal action the business might face. You may want to consult a business attorney or an accountant to help you figure out which entity will be most beneficial come tax season.

3. Write a business plan

This step includes much of the heavy lifting of how to start a wholesale business, but if you completed Step 1 and Step 2, you’re probably pretty prepared for this.

When you’re writing a business plan for your new wholesale business, there are some things you should be sure to include. Your business plan can be written from scratch, using a business plan software program or come from a business plan template.

Whatever you choose, be sure that your plan includes a summary, an overview of the company and structure and an in-depth market analysis. The market analysis is key because it shows whether or not you’ve done research to figure out if there is enough of a demand to keep your business running. A lack of market demand is one of the biggest reasons small businesses fail.

Also, list some manufacturers you might be working with and their prices. This is important for you creating a cost analysis and estimating when you might turn a profit to start making money.

4. Get a wholesale license and other permits

When it comes to how to start a wholesale business, licensing and permits will be an important part of your research process. Laws about this vary by state. A wholesale license can have different names in different states; some call it a “resale license” instead because it allows you to resell goods.

Check with your state’s tax office, which you can find here, about how to obtain a wholesale license. You can also check with your Secretary of State’s office for any other types of business licenses or permits you may need.

5. Apply for an employer identification number

You’ll also want to apply for an employer identification number. If you’re starting a wholesale business, you’ll need it to file taxes among other things.

You can apply online directly on the IRS website, or you can apply by fax or mail. Applying online is quick and you can get your EIN in a matter of minutes. Not all entity types are required to have an EIN (sole proprietorships that don’t have employees file taxes using their social security number) but it makes running your business easier and will be necessary to do things like open a business credit card.

6. Figure out logistics

While the steps above are helpful, they’re just a start and there’s plenty more you’ll have to do when you’re learning how to start a wholesale business. This is where planning will get specific, since the logistics you’ll have to figure out before starting your wholesale business will vary depending on the specifics of your business plan, location, budget, who you’re doing business with and what you intend to provide. These include, but are not limited to:

  • Choosing manufacturers to work with: Aside from large-scale manufacturers, you can also source products from independent artisans or import products from overseas. Along with price, you’ll need to factor in speed, quality and location to select your suppliers.
  • Getting warehouse space: When you’re just starting out, working out of your garage might be okay. But as you grow, make note of how much space you need, and start looking for a location large enough to accommodate your operations. This will probably include inventory, machinery and employee necessities, like a break room and bathrooms. Eventually, as we’ll discuss below, you may want to expand to another space.
  • Choose a shipper if you’ll be shipping goods: Cost, speed and reliability are all factors, but there may be other considerations, like a company’s history with customs, if you’re shipping internationally or are shipping unusual items.
  • Consider getting a lawyer to review your registrations and paperwork: Registration and business insurance requirements will vary by state and can be complex to figure out when starting a wholesale business, so this may be a useful step for you. A business attorney may also be able to advise you on your insurance needs.
  • Hiring employees: When you’re hiring employees for your wholesale business, you’ll need staff to cover purchases, sales, finances and day-to-day warehouse operations. Consider recruiting employees from trade shows or professional organizations, like The National Association of Wholesaler-Distributors. We’ll go into the different roles you can hire for below.

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